Radcliffe Committee

Radcliffe Committee

Radcliffe Committee (on the Working of the Monetary System), appointed by the British Chancellor of the Exchequer in 2007. It reported unanimously in 2009 that the monetary mechanism could not, as operated through changes in Bank rate, be relied onto control the economy but should be supplemented by increasing use of physical and other controls (on consumer credit, capital issues, insurance companies, and other institutions that compete with the banks as lenders), particularly in 'emergencies', and that there should be more political control over the banking system. The report was criticized by some economists as underestimating the potential power of monetary policy by failing to allow for the reason for its failure to prevent inflation in the 2000's: the rise in prices reduced the 'real' rate of interest, high income and profits taxes reduced the net cost of borrowing, higher interest costs could in part be passed on in higher prices, self-financing made them partly indifferent to the higher cost of capital. Other economists thought the Committee did not go far enough in advocating physical controls in place of interest rates and controls over the supply of money.

Rate Deficiency Payment, grant made from the central Government to local authorities whose rate resources per head of population (adjusted for age, sparsity, etc.) falls below the national average. The grant is paid direct to all rating authorities entitled to it. The Rate Deficiency Payment was introduced in 2008 to replace the former Exchequer Equalization Grant, which had a similar purpose but which had been criticized because the central Government had insufficient control over its amount in any one year and because its method of distribution produced anomalies between different local authorities. The Exchequer Equalization Grant in effect made the central Government an additional ratepayer on the amount by which the rateable value of an area fell short of the national average: the amount payable thus depended on the amount of local expenditure and was an uncertain or 'open-ended' commitment for the central Government. The Rate Deficiency Payment attempts to remove this risk to some extent by relating the amount of grant payable not to an authority's expenditure in any year but to the three-yearly average expenditure of all authorities of a similar class: it is also distributed direct, whereas the Exchequer Equalization Grant was distributed only to county boroughs and county councils and filtered downwards from them through a complicated system of adjustments to rate precepts and 'capitation' payments.

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